Weak China trade weighs on stocks; risk-off trade in play

NEW YORK (Reuters) - World stock indexes fell on Monday after a surprise contraction in Chinese trade reignited fears of a sharper slowdown in global growth and caused investors to sell riskier assets.

Oil prices fell more than 2 percent and the safe-haven yen rose against the dollar following the China news, which added to worries that U.S. tariffs on Chinese goods were taking a toll on the world’s second-largest economy.

“The biggest theme (in the market today) is risk-off,” said John Doyle, vice president of dealing and trading at Tempus, Inc.

The United States and China - the world’s two largest economies - have been in talks for months to try to resolve their bitter trade war, with no signs of substantial progress.

Adding to the gloom were weak industrial output numbers from the euro zone, which showed the largest fall in nearly three years.

Softening demand has been felt around the world, with sales of goods ranging from iPhones to automobiles slowing, prompting profit warnings from Apple (AAPL.O) among others.

Trade-sensitive shares eased, including Boeing Co (BA.N) and Caterpillar Inc (CAT.N), though U.S. stock investors also were on edge as the U.S. corporate earnings season kicked off.

“It will be a big thing to see if the Chinese slowdown is real, or if it is an excuse for some companies not to hit the high growth seen last quarter,” said Craig Birk, chief investment officer at Personal Capital in San Francisco. “If things are really slowing down, you’ll start to see it show up this quarter in earnings.”

The Dow Jones Industrial Average .DJI fell 86.11 points, or 0.36 percent, to 23,909.84, the S&P 500 .SPX lost 13.65 points, or 0.53 percent, to 2,582.61 and the Nasdaq Composite .IXIC dropped 65.56 points, or 0.94 percent, to 6,905.92.

The pan-European STOXX 600 index lost 0.48 percent and MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 0.51 percent.

U.S. Treasury yields rose as risk sentiment improved after President Donald Trump said he was not looking to declare a national emergency amid a partial government shutdown.

Benchmark 10-year notes US10YT=RR last fell 1/32 in price to yield 2.7024 percent, from 2.699 percent late on Friday.

In the foreign exchange market, the Japanese yen JPY=, a safe-haven currency that benefits in times of geopolitical turmoil, rose against the U.S. dollar. The yen was last up 0.3 percent against the greenback.

COMMODITIES SUFFER

The prospect of slowing global growth also roiled some commodity markets. Industrial metals copper CMCU3 and aluminum lost ground in London and Shanghai.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 10, 2019. REUTERS/Brendan McDermid

Three-month copper on the London Metal Exchange ended down 0.8 percent at $5,897 a ton, its lowest in more than a week.

Oil prices ended down more than 2 percent on the global slowdown concerns.

Brent crude LCOc1 futures lost $1.49, or 2.5 percent, to settle at $58.99 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures fell $1.08 to settle at $50.51 a barrel, a 2.1 percent loss.

Additional reporting by Kate Duguid, April Joyner and Stephanie Kelly in New York and Medha Singh and Karin Strohecker; Editing by Nick Zieminski and James Dalgleish